5 Ways Mining Business Models will Change in the Future
In the past, the mining sector has primarily focused on traditional mining business models to improve productivity. However, trends are now revealing that enabling infrastructure is the central cost in developing new mines. As a result, mining companies now need to look beyond traditional mine development methods (such as geology, mining and processing) and to new strategies to improve productivity and profitability.
Mining IQ has summarized five considerations mining companies should contemplate when creating a mining business model for the future.
1. Cost is only half the equation
Mining companies need to explore how to get better value from the resources they have. While cost is an important element, it’s not everything. Companies should be focusing more on value. The problem with reactive cost-cutting (particularly in the current state of the industry) is it can potentially destroy mine value. A lean and innovative approach to keeping costs down, while focusing on value outputs is needed in order to regain footing.
2. Out with the old, in with the new
The mining industry is currently facing the challenge of using mine development methodology that may have been right for when mines were less remote and less complex, but are now out-dated.
For miners to improve productivity and ROI, they need to get an optimum ‘whole of mine business’ approach, and understand the whole value chain and integrated decisions across that value chain. This can only be achieved effectively by embracing new technologies and innovation.
3. Remove silos across the mining value chain
Like most businesses the mining industry tends to compartmentalize roles and job functions so that manager can control things. As a result silos can be quite common, resulting in bottlenecks in efficiency. Businesses that create integration across the value chain so those managers are removed from their silos and are thinking and being rewarded for the performance across the whole business will make a huge difference to the performance of their mines.
4. Focus on infrastructure and sustainability
In recent years, safety has become the number one important focus across the mining industry, with safety being built into projects. It is now a fundamental part of the way mines are developed and operated. Some might argue that sustainability is the new safety. Having a culture of sustainability will be fundamental to the efficiency of projects, enabling them to be delivered with the best ‘triple bottom line’ outcomes.
5. Embrace new technologies
The emergence of driverless vehicles and remote operating centers has increased efficiencies into the mining sector in terms of being able to manage with fewer resources and costs. Looking towards the future, it will be important for companies to embrace new and emerging technologies and understand how they can impact and improve bottom line efficiencies.
Lithium producers bullish as EV revolution ramps demand
Rising demand for lithium is stoking prices for the electric vehicle battery metal, fueling long-delayed expansions that still may not produce adequate supplies that automakers need to meet aggressive production plans.
Growing industry optimism from higher lithium prices is a change from last year when funding for mines and processing plants dried up during the pandemic.
Albemarle Corp, Livent Corp and other producers are scrambling to make more lithium, but some analysts worry the recent price jump will not spur a big enough expansion to meet a planned wave of new EV models by mid-decade.
Since January, General Motors Co, Ford Motor Co LG Energy Solution and SK Innovation Co, along with other automakers and battery parts manufacturers, have said they will spend billions of dollars on EV plants.
U.S. President Joe Biden has proposed spending $174bn to boost EV sales and infrastructure. The European Union has similar plans, part of a rush to catch up with global EV leader China.
Those moves have helped an index of lithium prices jump 59 percent since April 2020, according to data from Benchmark Mineral Intelligence, a commodity pricing provider.
The rising demand “reflects what feels like a real and fundamental turning point in our industry,” said Paul Graves, chief executive of Livent Corp, which supplies Tesla Inc. On Monday, it said it would more than double its annual lithium production to 115,000 tonnes.
Graves warned, though, that “it will be a challenge for the lithium industry to produce sufficient qualified material in the near and medium term.”
Albemarle, the world’s largest lithium producer, aims to double its production capacity to 175,000 tonnes by the end of the year when two construction projects are complete. Albemarle's Q1 profit beat expectations thanks to rising lithium prices. Chile’s SQM, the No. 2 producer, said its goal to expand production of lithium carbonate by 71 percent to 120,000 tonnes should be complete by December.
Australia’s Orocobre is paying $1.4 billion for smaller rival Galaxy Resources, a strategy designed to boost scale and help it grow faster in regions closer to customers.
“The next few years are going to be critical in terms of whether there’s enough available lithium supply, and that’s why you’re starting to see commodity prices start to ramp,” said Chris Berry, an independent lithium industry consultant.
The price gains helped Albemarle and other major producers, including China’s Ganfeng Lithium Co and SQM, post big gains in first-quarter profit and boost forecasts for the year.
Even China’s Tianqi Lithium Corp, saddled with debt due to years of low lithium prices, signaled that recovering demand should help it swing to a profit this year.
Forecasts call for demand for the white metals to surge from about 320,000 tonnes annually last year to more than 1 million tonnes annually by 2025, when many automakers plan to launch new EV fleets, according to Benchmark.
Still, demand is expected to outstrip supply in 2025 by more than 200,000 tonnes, so lithium prices may need to rise to encourage producers to build more mines. That could boost the prices consumers pay for EVs. “Companies across the lithium-ion supply chain are in the best position they’ve been in for the last 5 years,” said Pedro Palandrani of the Global X Lithium & Battery Technology ETF , which has doubled in value in the past year.